welcome jim hunt, executive vice president and cfo, walt
TRANSCRIPT
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WelcomeWelcomeJim HuntJim Hunt, , Executive Vice President Executive Vice President
and CFO, Walt Disney Parks and and CFO, Walt Disney Parks and ResortsResorts
Andy WuAndy Wu, , VP of Finance and VP of Finance and Business PlanningBusiness Planning
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Spain or France
Analyzing the Facts
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Key AssumptionsKey Assumptions
Hotel occupancy rate: 100%Hotel occupancy rate: 100%
Average IncomeAverage Income
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Capital BudgetingCapital Budgeting
WACC = 9%WACC = 9%
•Cost of debt = 10%Cost of debt = 10%
•Cost of equity = 16.5%Cost of equity = 16.5%
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Capital BudgetingCapital Budgeting
NPVNPV
Initial Investment = $470 Initial Investment = $470 millionmillion
IRR = 48%IRR = 48%
Beta = 1.5Beta = 1.5
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Business RiskBusiness Risk
NOPATNOPAT
ROICROIC
Standard DeviationStandard Deviation
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Business RiskBusiness Risk
Demand VariabilityDemand Variability
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Business RiskBusiness Risk
Sales Price VariabilitySales Price Variability
Input Cost VariabilityInput Cost Variability•Spanish GovernmentSpanish Government
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Ability to adjust output in Ability to adjust output in response to inputresponse to input
New ProductsNew Products•Cultural DifferencesCultural Differences
Foreign Risk ExposureForeign Risk Exposure
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SWOT AnalysisSWOT Analysis
StrengthsStrengths
•WeatherWeather
•Government AidGovernment Aid
•Price of LandPrice of Land
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SWOT AnalysisSWOT Analysis
WeaknessesWeaknesses
•RevenuesRevenues
•CurrencyCurrency
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SWOT AnalysisSWOT Analysis ThreatsThreats
•TerrorismTerrorism
OpportunitiesOpportunities•Government Government StabilityStability
•EconomyEconomy•OlympicsOlympics
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SupportSupport•GovernmentGovernment•CommunityCommunity
Competing AttractionsCompeting Attractions Higher ROICHigher ROIC
RecommendationsRecommendations
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QuestionsQuestions
and/or and/or
CommentsComments
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FranceFrance
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Key FactorsKey Factors
Initial InvestmentInitial Investment
Magic Kingdom vs. MGMMagic Kingdom vs. MGM
Number Of VisitorsNumber Of Visitors
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Number of VisitorsNumber of Visitors
What If:What If:
•100%100%• 75%75%• 50%50%
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Ticket SalesTicket Sales
In Park SalesIn Park Sales
Hotel OperationsHotel Operations
Number of VisitorsNumber of Visitors
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Capital Budgeting Capital Budgeting WACC: 7.75%WACC: 7.75%
•Cost of Debt: 9%Cost of Debt: 9%•Cost of Equity: 14.8%Cost of Equity: 14.8%
Beta Risk: 1.7Beta Risk: 1.7
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Capital BudgetingCapital Budgeting
NPVNPV•Walt DisneyWalt Disney
France: $2.2 billionFrance: $2.2 billionSpain: $1.4 billionSpain: $1.4 billion
•Euro DisneyEuro Disney
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IRR – Walt DisneyIRR – Walt Disney
•France 51%France 51%•Spain 48%Spain 48%
Capital BudgetingCapital Budgeting
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Business RiskBusiness Risk
NOPATNOPAT
ROICROIC
Standard DeviationStandard Deviation
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Business RiskBusiness Risk Foreign Risk ExposureForeign Risk Exposure
Demand VariabilityDemand Variability
Develop New ProductsDevelop New Products
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StrengthsStrengths
•Tourist attractionTourist attraction
•Name RecognitionName Recognition
•FamiliarityFamiliarity
France AnalysisFrance Analysis
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WeaknessesWeaknesses
•Different cultureDifferent culture
•Design duplicationDesign duplication
France AnalysisFrance Analysis
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France AnalysisFrance Analysis ThreatsThreats
•UncertaintyUncertainty
•OppositionOpposition
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France AnalysisFrance Analysis
OpportunitiesOpportunities
•New marketNew market
•DiversityDiversity
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RecommendationsRecommendations
QuantitativeQuantitative•NPVNPV•IRRIRR
QualitativeQualitative•SWOT AnalysisSWOT Analysis
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QuestionsQuestions
and/or and/or
CommentsComments
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Conclusion Conclusion
What’s more important?What’s more important?
•NPV and IRRNPV and IRR•NOPAT and ROICNOPAT and ROIC
Further considerationFurther consideration